Karhoo
Karhoo founder and CEO Daniel Ishag.
Taxi startup Karhoo announced on its website yesterday that it was shutting down after running out of money.
The company, which claimed to be bigger than Uber, reportedly raised $250 million (£201 million) from investors last October, in addition to an undisclosed funding round in January.
Several sources have claimed that Karhoo never actually received anything like $250 million, saying the figure is more likely to be somewhere between $10 million (£8 million) and $20 million (£16 million), with the promise of further follow-on funding from investors if the company did well. Karhoo declined to comment.
Either way, the company has still burnt through millions of dollars in little over a year. Naturally many people are asking where all the money went.
A large portion of it appears to have gone towards giving people free rides, with several Karhoo users claiming they received hundreds of pounds worth of journeys from the company as a result of reusable coupons and generous refunds.
A US Karhoo employee, who wishes to remain anonymous, told Business Insider on Tuesday that there was "a lot" of money lost from "offering a lot of free rides."
They added: "There were many promo codes out, and we ended up having to deal with a lot of fraud prevention in our app. They were usually $40 (£32) promo codes per ride, so people would take a $39 (£31) dollar ride over a $28 (£23), for example."
It is with much regret that we have to announce that Karhoo has had to close its service. Full Statement here: https://t.co/oJGsQfocDf
- Karhoo (@karhoo) November 8, 2016#karhoocodes TERES543 😁😊
Following the news that Karhoo was shutting down, Karhoo user Alastair Budge wrote on the London Startups Facebook group: "I think I must have taken >£500 of free karhoo rides. Going to miss free taxis...."
Karhoo user Omar Nawaz wrote in the same group: "I got at least 120 of free cabs then stopped using it. Constant promotions does not build retention or habitual behaviour." Another Karhoo user, Karen Ho, said she was given £50 credit after a cab she booked through Karhoo cancelled on her. "They [Karhoo] let me break it down into £20+£20+£10 vouchers for three use, totally insane."
The US Karhoo employee said the company also spent a significant amount of money on consulting from Ernst and Young.
Founded in London just 18 months ago before relocating its HQ to New York, Karhoo worked by connecting to the fleet dispatch system of black taxi, minicab and executive car operators, allowing passengers to choose and book their ride based on price, arrival time, vehicle style and cab firm.
The company employs somewhere between 180 and 200 staff across London, Israel, New York, and Singapore, with approximately 100 of those jobs in London.
"We have had a whole 'doom and gloom' in the air for the past week, starting at Halloween when we found out
Here is the full statement from Karhoo:
"It is with much regret that we have to announce that Karhoo has had to close its service and is now looking at the next steps for the business.
The Karhoo staff around the world in London, New York, Singapore and Tel Aviv have, over the past 18-months, worked tirelessly to make Karhoo a success. Many of them have worked unpaid for the last six weeks in an effort to get the business to a better place.
Unfortunately, by the time the new management team took control last week, it was clear that the financial situation was pretty dire, and Karhoo was not able to find a backer.
We would like to thank our staff, our partners, the fleets around the world that shared our vision, and the hundreds of thousands of people who downloaded the app and supported what we were trying to do.
The world needs a Karhoo."